Hot or not? 2020's top retail buzzwords
There is never a shortage of buzz in the retail industry when it comes to technology, transformation, and disruption. However, retailers and brands who have been in this industry long enough know that there is often a line between what’s possible and what’s practical – between what to do now and what to do later. Here we ask Forrester analyst Brendan Witcher to answer questions about what’s hot and what’s not.
1. Hot or Hype? When it comes to personalization, is this a “hot” strategy that can win customer business and advocacy or a “hype” strategy that retailers should take with a digital grain of salt?
Brendan Witcher, Forrester: Personalization as a retail term has been in circulation for decades, but retailers and brands are redefining what it means to personalize customer experiences. Gone are the days when the term is synonymous with making a product or service recommendation. Today’s definition of personalization is to successfully deliver relevant, value-added experiences for each individual customer. Difficult? Yes. Impossible? Not at all, and many retailers and brands are finding success in doing so.
Personalization, however, is harder to achieve than most digital professionals realize. After all, an experience is only personalized if the experience is relevant and adds value to the customer. If the customer does not perceive it as such, then experience – by definition – is not personalized. What retailers and brands often fail to realize is that the level of success for a personalization strategy depends on mastery within three other business capabilities:
- Using data as a competitive advantage. Personalization technologies are often referred to as engines that drive customer experience. Extending that analogy further, to make an engine work properly, the quality of the fuel – or in the case of personalization, the data – must be high quality. However, elements like age, gender, and last product purchased simply no longer meet that standard. Fortunately, 80% of consumers today say they are willing to share at least some kind of information to have their experiences personalized.[i] Data strategies must be purposeful, reliable, and lead to actionable insights that can be used to add meaningful, positive change to a shopping journey.
- Dovetailing content strategies to customer strategies. Personalization is only accomplished by aligning customer data (the need) with content data (the fix). However, companies with disorganized folder systems, multiple content repositories, and lackluster metadata can easily hinder personalization efforts. To leverage assets for personalization, atomized content must be available and strategically designed to serve various but specific audiences. In other words, a comprehensive organization and identification of content enables systems of insights and engagement to align the right content with the right customer at the right time.
- Achieving scale through advanced automation, AI, and machine learning. Advanced analytics tools play a significant role in helping organizations aggregate, analyze, and leverage data to improve personalization strategies. They can also be used to surface insights around customer behavior, patterns, and preferences for channels, engagement, and campaign responses. The recent generations of these tools have provided retailers with predictive capabilities, where outcomes can be estimated given a specific set of variables. The latest tools, those leveraging the real power of AI and machine learning, are able to deliver results in a prescriptive manner where the desired outcome is the input, and the tools assess all variables to find the combination most likely to reach that objective. This is one of the reasons that 59% of global retail purchase influencers plan to invest in AI in 2020.[ii]
2. Hot or Hype? Let’s talk omnichannel. While COVID-19 has changed this for many retailers, is it a “hot” strategy retailers need to double down on or a “hype” buzzword that is fizzling out?
Witcher: Omnichannel commerce was already a common term before COVID-19, but the pandemic put a rather large exclamation point on the need for retailers and brands to be able to sell and fulfill orders anywhere, anytime, and in any way the customer desires. For example, 87% of retailers planned to offer buy online, pick up at store by the end of 2022.[iii] What digital professionals who had already launched omnichannel services prior to this year discovered was that consumers were using these forms of fulfillment far more than expected. They also learned, unfortunately, that it took more than sending an order to a store to become an omnichannel master.
The full transformation from multi-channel to omnichannel for retailers means supporting customer journeys that flow online to offline, such as buy online, ship to store, and offline to online, such as endless aisle. Omnichannel reverse logistics have also become standard, with nearly 3 out of 4 (73%) of retail and brand professionals saying they already supported buy online, return to store (any item). In the process of trying to move quickly, before and due to recent events, retailers run the risk of moving forward without all the right components in place:
- People and processes present as many problems as setting up the technology. At the heart of every great omnichannel program lies the order management system (OMS). While 67% of retail and brand professionals said setting up this technology was very or somewhat challenging, 64% said the cultural change to get store staff to fully support omnichannel was very or someone challenging. In addition, 48% said implementing new processes for efficiently accepting, picking, and packing online orders fell into the same two categories.[iv] Unfortunately, it is with people and processes where customer experiences can often turn negative. Assuring issues in these areas have been resolved is the key to long-term customer adoption of omnichannel programs.
- Requirements for change go beyond the website and store operations. Internal stakeholders for omnichannel initiatives are often determined by lines that are easily drawn to direct responsibilities for the programs, most often ecommerce and store operations. However, changes within other departments are critical for omnichannel programs to succeed. Inventory planning, for example, needs to adjust for shifts in customer demand from ship to home to pick up in store. Other areas include logistics, procurement, and call centers. Even finance plays a role, with 88% of retail and brand pros stating they had some degree of challenges with managing store staff incentives and goals to align with supporting omnichannel orders, such as giving stores credit for online orders. [v]
- Curbside and same-day delivery are now part of the equation. During the recent pandemic, retailers were quick to duct tape together systems and solutions for unlocking inventory in store locations and using programs like ship-from-store, curbside pickup, and even same-day delivery to get orders out to customers. While consumers are usually unaware when an order ships from a store, they have been exposed to numerous retailers providing the latter two services – often at no charge – during the pandemic. Whether consumers will continue to expect these services into the future is unclear, but retailers should keep a watchful eye on competitors and evaluate for themselves the financial and operational viability of such programs.
3. Hot or Hype? Many retailers and brands sell through Amazon’s marketplace, but what about retailers and brands starting their own “marketplace” programs, hot or hype?
Witcher: Forrester’s forecast data at the beginning of 2020 showed that 67% of global B2C online commerce would occur via marketplaces by 2022. In fact, the two most successful online retailers, Amazon and Alibaba, owe a great deal of their success to their marketplace models. As such, those who dismiss marketplaces as something to ignore for 2020 risk lost opportunities for sales and losing customers to retailers with rapidly expanding assortments. In fact, some of the largest multichannel retailers are investing heavily in their own marketplace programs – including Walmart, Target, and Best Buy – and brands are slowly but noticeably moving onto marketplaces to help achieve their direct-to-consumer goals.
All this should lead digital professionals to assess how well they have evaluated a key question about their own online strategies: “Have we properly weighed the expected benefits and potentially positive business outcomes against the challenges and efforts of selling on and/or starting our own marketplace?” In answering this, consider the following important factors that have evolved over the past couple years:
- First-to-market retail leaders paving the way for fast followers. Marketplaces are now common in most global markets where online commerce is ubiquitous. For the retailer or brand just beginning to consider building a marketplace strategy, one task that has already been done for them is educating the consumer on trusting a marketplace seller. Indeed, consumers have been trained to view marketplace sellers as an extension of the retail brand they trust and are shopping with, to the point where 87% of U.S. online adults agree or are indifferent to purchasing through a familiar marketplace, even if the seller is unfamiliar to them.[vi]
- Marketplaces as a growth engine. Traditional channels are becoming harder to generate growth through, and new retail channel capabilities – such as smart speaker commerce and same-day delivery – are becoming closed to many retailers that do not have the means to compete. Marketplaces provide expansion within a retailer or brand's core capabilities without having to launch completely net-new initiatives and do the time to achieve operational competencies.
- Consumers consolidating sources for goods and services. Aggregators – such as Travelocity, Yelp, Facebook, and even Amazon – have proven their worth in the consumer’s mind. Digitally savvy consumers have adopted numerous kinds of aggregators into their normal routines and keep those brands top of mind in the markets they serve. Already, 60% of U.S. online adults say that marketplaces offer convenience that I appreciate.[vii]
Keep on learning, watch the webinar, "Hype Or Not? Forrester Research Previews Five of the Top 30 Buzzwords in Retail" now, on demand.